2020 The Year of Consolidation for Europe. Who is the next Coinbase?

TokenAnalyst and Mining insights, Deribit and 5AMLD, A new ETP, WEF launching CBDC guidelines and much more!

Hi Everyone, Thank you for supporting the European crypto ecosystem 🇪🇺.

Etienne Twitter, etienne@blockwyre.com)

ps: don’t hesitate to send me an email if you enjoy this newsletter, Always great to have feedback :)


💡Thank you NovitasFTCL for supporting the 🇪🇺 Ecosystem

We want to thank our partner NovitasFTCL, a leading boutique firm of corporate finance advisors to the European Financial Technology sector. 

Based in London, NovitasFTCL has 45+ years of combined experience in the FinTech sector and executed over 120 transactions across Europe including M&As and Fundraisings. 

Do not hesitate to contact me if you want an introduction. 

🕵️‍♂️2020 The Year of Consolidation for Europe. Who is the next Coinbase?

  • Paul from Pantera Capital recently published an article about the age of consolidation which I think is really on point and the team from TokenData published an excellent overview of the crypto M&A landscape - $2.84bn of M&A deal value in 2018 and $700m in 2019

  • The digital assets ecosystem is maturing at a rapid pace. One year in this ecosystem seems to be the equivalent of five to ten years in the traditional market. This is driven by the rapid adoption from both retail and institutional investors, the network effect from the underlying technology and the nascent regulation leaving room to innovation. 

    The main global trends include

    (i) Exchanges are very active acquirers: Flush with cash, the exchanges are looking for top talents through acqui-hires, to broaden their geography reach and to add new capabilities (ie. Coinbase acquiring Xapo to strengthen its custody function)

    (ii) Consolidation of prime broker activities: The good people at Blockchain Capital added the below slide in their latest 2020 predictions. This is on point as most crypto capital markets companies are building silo services, ‘I provide only Lending, sorry!’ ‘I am only a OTC desk’ etc… This is a massive pain for the end-users and make these businesses very market dependent. The only company that has quietly built a full-service prime broker style company is DCG - Lending, OTC, Investment Management etc… Nevertheless, there are other rooms for expansion. The Blockchain capital team forgot a few items in their below slides including: Research, Cash / Treasury Management, Banking services, fiat-onramp etc… It’s still early!

(iii) Fintech companies are moving to crypto through M&A: As everyone wants to be a bank, it feels natural for Tech companies to add crypto to their offerings. The main reason is the strong virality and a high margin business line. Look at Revolut or Etoro, both companies benefited massively from the 2017 boom and added new users and grew their profits. Tech companies will likely continue to look to innovate in this sector and will have the possibility to acquire ICOed companies that are running out of cash…

What does that mean for Europe?

2019 was a consolidation year for the European ecosystem. Category leaders raised large war chest or got acquired by international competitors. Incumbents were also active through partnerships and investments as they do not want to miss this new paradigm shift.

  • M&A: The exchange ecosystem is a prime example for this with already few landmark acquisitions such as Bitstamp ($400m+) by Nexon and CryptoFacilities ($100m+) by Kraken 

  • Funding: Some of the largest funding rounds happened with SEBA ($100m+), Ledger ($88m+) , Chainalysis ($53m+) and Elliptic ($35m+)

  • Institutional: Unlike in FinTech, the incumbents have already started to be active. Some examples include Nivaura raising $20m from the London Stock Exchange or Deutsche Börse, Swisscom teaming up with Sygnum to develop a trusted digital asset ecosystem

2020 will be another consolidation year driven by new emerging global players from Europe, new acquisitions by B2C FinTech companies looking to expand into digital assets and further consolidation by crypto and non-crypto companies looking to lead the regulated and unregulated market

  • New emerging global players: Deribit (Derivative exchange space), CryptoCompare (Data) and Copper (Primer Broker, clearing)

  • Retail FinTech: Revolut has been expanding its crypto efforts since 2017, Bux recently acquired Blockport and Ziglu has adopted a digital assets first use case

  • Crypto Native: Meanwhile at the seed/Series A stage, companies like Nexus Mutual, Guesser or Argent are growing and have found product market fit. 2020 will be the year of their growth expansion with likely new funding rounds

  • Central Bank Digital Currency: While Tether has done a great job for unregulated stablecoin, the central banks are now gearing up to launch their own digital currency. The question is what (private) chains will they use?

At the cross-road of capital markets and digital assets, the digital assets capital markets ecosystem remains difficult to navigate for most investors and startups. The high level of noise and fast changing landscape make it difficult for newcomers.

As such, there are only few European investors comfortable to lead round and digital assets companies are facing difficulty to raise their awareness. Finally, corporate investors interested in the space are often lacking the network and insights to navigate this ecosystem. 

Don’t hesitate to contact me if you are an entrepreneur or investor interested to discussed fundraising or M&A in the European ecosystem! (Just reply this email)

🐦 Tweets of the week

Excellent thread from the TokenAnalyst team. Some key takeaways include the shift to ASIC mining aka professional mining had a positive correlation to the price. In other words, it was a milestone for the professionalisation of Bitcoin as a new industry.

And if you are interested in Bitcoin Mining and Lightning you should attend the below event!

🤹 Startups News

  • Due to the 5AMLD regulations, Deribit will introduce an additional tier of KYC requirements, providing two different KYC levels — Level 0 and Level 1. Level 0 will allow Deribit clients to withdraw up to one Bitcoin (BTC) or 50 ether (ETH) per 24 hours, while no withdrawal limits apply to Level 1 [Source]

🎁 Startups Product & Partnership

  • LocalBitcoins disabled accounts from several African countries and sent a notice to traders. A number of countries were defined by the EU commission, where they require ‘an enhanced due diligence process’ before they can operate. Botswana, Ethiopia, Ghana, Libya, Nigeria, and Tunisia are listed as the only African countries affected, however traders from other countries are also complaining that their accounts were suspended [Source]

  • Digital asset issuer Amun is launching a financial product for traders who predict bitcoin's price will drop. Switzerland-based Amun launched the 21Shares Short Bitcoin ETP (SBTC) on the Swiss Stock Exchange (SIX), an ETP tracking Bitcoin’s price movements inversely [Source]

  • The United Kingdom’s legendary Lancashire Cricket Club will sell tickets for all domestic and international fixtures at Emirates Old Trafford in 2020 through a blockchain-based platform called TIXnGO [Source]

🏭Corporates

  • The total number of companies working with digital assets and blockchain technologies in the Crypto Valley has reached 842, the survey reveals, compared to 750 in its last year’s edition. Jobs in the sector have also increased substantially – from 3,300 in 2018 to 4,400 by the end of 2019 [Source]

  • HMRC posted on Jan. 17 in an open contract call worth 100,000 pounds sterling, should gather intelligence through cluster analysis. The HMRC’s Cybercrime team hopes this will help them correlate crypto-asset transactions with service providers

  • The World Economic Forum (WEF) has for the first time developed a framework for central bank digital currencies (CBDCs). The framework, dubbed the “CBDC Policy‑Maker Toolkit,” provides a guide for central banks around the world to help them decide if CBDC is right for them. For those who are already researching, it helps them "make progress quickly," said the WEF [Source]

🏦Regulations / Universities

  • Oksana Markarova, Ukraine’s Finance Minister, reportedly said that the State Financial Monitoring Service of Ukraine (SFMS) will be the responsible authority for tracking the sources of origin of the funds on citizens’ crypto wallets [Source]

  • A fully regulated tokenized real estate fund has been approved by officials in Liechtenstein. The fund was created by Ahead Wealth Solutions, a financial services provider based in the nation's capital Vaduz, in collaboration with Bank Frick and blockchain technology provider Token Factory [Source]

  • Alexander Vinnik, the Russian-born IT specialist who spent over two years in detention in Greece, where he was arrested on a U.S. warrant, is now in Paris. The alleged BTC-e operator, suspected of laundering at least $4bn through the now defunct crypto exchange, has been handed over to France after the Greek judiciary turned down a plea against his extradition [Source]


About the author: Etienne used to head principal strategic investment (Companies, Funds and token investment) at Elwood, One of the largest European digital assets investment firm spun off of Brevan Howard, billion-dollar Macro Hedge fund. Previously, he was part of the founding team at the largest Capital Markets Venture Fund in London, Illuminate Financial.